Gov’t order on payment of pending bills yet to impact businesses – Survey

Local firms are yet to register gains from the recent order by President Uhuru Kenyatta on the clearance of pending bills, a new survey shows.

According to the survey conducted in August by Stanbic Bank and IHS Markit, the firms have failed to honor client orders for the fourth consecutive month as cash-constrains remain pronounced, inhibiting the ability of the companies to hit optimal output.

As a result, business conditions in the Kenyan private sector during the month of August quoted by  the survey’s  Purchasing Managers’ Index (PMI) came in at a lesser 52.9 percent in comparison to a greater 54.1 percent rate in July.

According to Stanbic Bank Regional Economist Jibran Qureishi, the government is yet to fast track reforms including the hastening of clearances to pending bills accruing to companies in addition to easing credit access.

“For the first time since May, firms have once again voiced concerns around cash flow issues. To ensure inclusivity in economic growth, urgent reforms ought to be conducted,” he said.

Firms output remains low despite a rise in new customer orders resulting from increased client numbers and larger purchases which drove up the demand for commodities.

Further, the companies failed to leverage on a slowdown in the growth of output prices under a declining inflation rate to boost sales even as higher taxes and a weakened shilling offset the scope for the firms to make further gains in output

The continued stay of interest rate caps has further fueled the plight on companies productivity, creating a perfect storm which has had an accompanying effect of freezing credit supply on both sides of the demand/supply curve.

Even so, companies have scaled up their accumulation of raw materials in an apparent anticipation of improved market conditions over the medium term.

Company input buying grew at the sharpest pace in 14 months as some businesses grew their inventories for new projects even as some firms told of difficulties in acquiring the said inputs.